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Chips to Compression: Why NVDA Investors Shouldn't Overlook AROC

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Key Takeaways

  • NVIDIA projects $3 trillion to $4 trillion in AI infrastructure spending by 2030.
  • NVDA's full-stack AI factory solution can capture $35B from a $50B to $60B facility.
  • AROC benefits as natural gas demand rises to power gigawatt-scale AI data centers.

It’s no secret that investors betting on the future of AI are pouring money into NVIDIA (NVDA - Free Report) stock. The powerful chips that NVDA is making are being utilized to run AI models. As the world builds more data centers, often referred to as AI factories, demand for chips is exploding. However, there is more to the story.

To power the data center, a massive amount of electricity is required, and most of the power comes from natural gas. Hence, investors shouldn’t overlook ArchrockInc. (AROC - Free Report) .

NVIDIA’s AI Factories: Capturing Billions From the AI Boom

On its latest earnings call, NVIDIA stated that by 2030, the world will spend an estimated $3 trillion to $4 trillion on AI infrastructure. Following the massive investment across the industries, it aims to profit by selling complete AI factories – everything that AI data centers need, like graphics processing units (GPUs), Central Processing Units (CPUs), networking and switches – instead of just individual chips.

Thus, NVDA, carrying a Zacks Rank #2 (Buy), has huge potential to profit. On the call, the AI chip technology leader stated that a single gigawatt AI data center simply requires an infrastructure investment of $50 billion to $60 billion. Out of which, the full-stack solution of NVDA will be capable of capturing roughly $35 billion.

AROC: Powering AI Revolution Through Natural Gas Compression

Most importantly, there has been a growing demand for immense and reliable energy from these gigawatt-scale facilities. Thus, being a well-known provider of natural gas compression services in the domestic market, Archrock is well-positioned to capitalize on the mounting clean energy demand to power the data centers.

In other words, to produce cleaner electricity, more natural gas must be transported to the power plants from the shale plays. As a result, there has been a rise in demand for AROC compression services, which support the system that ensures natural gas flows.

Last Words

Thus, investors betting on NVDA should also invest in #2 Ranked AROC right away.  The valuation also signifies that investors are willing to pay a premium for the stock. AROC is currently trading at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 9.46X, above the broader industry average of 6.69X.

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